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Growth, geography, and the iron law: Understanding divergence across Indian districts

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Author Info

  • Samarjit Das

    ()
    (Indian Statistical Institute, New Delhi)

  • Chetan Ghate

    ()
    (Indian Statistical Institute, New Delhi)

  • Peter E. Robertson

    ()
    (University of Western Australia)

Abstract

The existing literature on Indian growth finds no evidence of B convergence across states. This represents a puzzle given the relatively free flows of capital, labour and commodities across state borders. We use a new data set to estimate convergence rates across 575 Indian districts and find that the pattern of absolute B- divergence remains. To explain this we develop a model of conditional convergence that includes a gravity indicator of trade and migration costs - specifically the distance from a major metropolitan center - as a conditioning variable. We find strong evidence of conditional convergence with an elasticity close to Barro's "iron law". We also find that geography and public infrastructure variables are important conditioning variables.

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Bibliographic Info

Paper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 13-06.

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Length: 31 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:ind:isipdp:13-06

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Keywords: Convergence; Divergence; Indian Economic Growth; Gravity Models;

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